Tuesday, September 27, 2005

SOHU: A Relative Value vs. SINA

I believe SOHU is a long term buy on a relative value basis,my 12 month target is 27$, based on 23 times of estimated 2006 EPS.

Although investors love SINA for its No.1 position in terms of traffic and advertising revenue, I prefer SOHU shares for a few reasons:
* SOHU has a more stable management team than SINA.
* SOHU's advertising revenue is catching up. In particular, 17173.com will continue to benefit from the increased competition of online games and increased marketing cost for new games.
* SOHU relies less on wireless revenues, which are vulnerable to regulation changes.

Here is my model used to get earning estimates:



SOHU 092505 Posted by Picasa

Thursday, September 22, 2005

Forun Technologies Update

Analyst Qiu from Forun Technologies has updated 2005 earnings estimate for a bunch of Chinese firms on Sep 21st:

SNDA: $1.77
NTES: $3.22
NCTY: $0.5
SINA: $0.89
SOHU: $0.74


My updated estimates are:

SNDA: $1.57
NTES: $3.16
NCTY: $0.49
SINA: $0.87
SOHU: $0.84

Tuesday, September 20, 2005

NetEase CEO Passed Away

Latest news says NetEase (NASDAQ:NTES) CEO Ted Sun passed away.

Friday, September 16, 2005

Greedy Camel

It is Friday again, I found the following puzzle quite interesting:

The distance between the towns A and B is 1000 miles. There is 3000 bananas in A, and the bananas have to be delivered to B. The camel can take 1000 bananas at most, and it will eat 1 banana for every next mile it will make. Figure out the strategy that yields the largest amount of bananas to be delivered to B.

SNDA: Unjustified Panic

Shorts had a nice journey in the past a few weeks. Despite the softness of some MMORPG titles, I believe the stock has been hit too much, I think the risk adjusted reward is very attractive at current price.

Full disclosure: I long SNDA.

Wednesday, September 14, 2005

Kai-Fu Lee allowed to work for Google

Google has won the court case against Microsoft to allow Kai-Fu Lee to work for Google. Lee will be Google's China chief.

Also, Google is to begin its 4 billion USD secondary offering this Thursday. Given the generosity showed recently by Yahoo and Ebay in their purchases, we won't be shocked if Google will spend that money to buy something. What could it be? Baidu? Or some U.S. broadband providers?

Pricey Chinese Stocks

Piper Jaffrey and Goldman started covering Baidu with underperform rating on valuation concerns.

Other Chinese stocks that look pricey to me include JOBS,CTRP,FMCN.

Monday, September 12, 2005

Merger Mania

News confirmed previous rumor that Ebay was buying Skype, the final price tag is 2.6 billion USD. Looks pricey.

Oracle to buy Siebel for 5.85 billion USD, a much sensible deal compared to that of Ebay.

Also, SINA CEO commented on the rumor that Shanda may sell its stake of Sina:
``We also heard the rumors, but haven't been officially
notified of this by the company. We cooperate with Shanda in our
business but we haven't merged.
``Shanda remains a very large shareholder, and to be honest
whether they remain as a large shareholder won't affect our long-
term strategy. We have no problems with Shanda remaining as a
shareholder. So far their plans haven't conflicted with ours.''


In my opinion, Shanda eventually may have to seek to sell its stake, since its effort to merge with Sina will be very hard to progress. If Shanda decides to do so, I think it won't be hard to find a buyer who will offer an attractive price for this controlling stake.

Friday, September 09, 2005

Shanda Film

Most will think he is kidding if someone tells you Shanda starts making films. I can not believe it either, but after I checked various online news sources, it is true that the first film produced by Shanda, Internet Teenagers, will be released on Sep 10th. Here you can find news report from PacificEpoch. There is also a dedicated website for this film.

I hold my view that in the long run Shanda should not be valued only as an online gaming company, rather I think it is likely that it will grow to a major entertainment content provider: Online games, Mobile games, Movies,Music,etc.

Also, in the long term, I think NetEase will do better than Shanda as far as online gaming is concerned, because of NetEase's strategic focus on product development and operation, while Shanda lacks the former and excels in the latter.

2005 China Internet Forum

The fifth Internet forum, 'West Lake Talks', will be held on Sep 10th in HangZhou, China. Former U.S. present has arrived and will give a speech. Other important attendants include CEOs/Presidents of Sina,Sohu,NetEase,Shanda,Tecent,Baidu,TomOnline and Ctrip.com. This event is organized by Alibaba.

Thursday, September 08, 2005

Shopping season

Big guys in the Internet space have fastened pace of acquisition. While Yahoo spent 1 billion and bought its way to a big presence in China, and the market was still not sure how Google will spend their newly raised about four billion dollars with 15 million shares of second equity offering, now Ebay was reported to be in talks to buy Skype, a company dedicated to make phone calls from a computer, for as much as 3 billion USD.

I am just wondering if this deal is true, how much more money Ebay can get out of Skype's business versus the price it will pay.

Wednesday, September 07, 2005

Baidu to buy Sohu??

I saw people passing on this rumor witout identifiable source. In my opinion, I don't think Charles Zhang will sell his company, if he does, there may be many buyers, since I believe SOHU is seriously undervalued compared to its peers and other Chinese tech companies.

Full disclosure, I long SOHU.

Shanda begins to serve RO

Starting from Sep 1st, Shanda(SNDA) starts operating Ragnarkok online(RO). RO is a game from Gravity(GRVY), a Korean game maker. In Q205, performance of RO in China was not good, it generated about only about 1 million USD revenue, estimated from the dislcosed revenue sharing by Gravity. However, there was a major update in July, which could possibily bring some players. Taiwan operator SoftWorld disclosed that after that major update, they saw higher PCUs, which helps SoftWorld achieve a record high of monthly revenue of 2005 in July.

Full disclosure: I long SNDA.